Car insurance costs continue to accelerate, rising by £109 annually

The cost of motoring continues to rise as the Confused.com car insurance price index Q3 2016 reveals a year-on-year price increase of 17%

Posted on 10 Oct 2016

Motorists are facing a steep climb in the cost of car insurance, according to the latest Confused.com car insurance price index powered by Willis Towers Watson. Over the last 12 months, prices have rocketed by 17% - equivalent to £109 - on average. This means a driver can now expect to pay £737 for a typical comprehensive car insurance policy.

In terms of a quarterly increase, drivers face another bump in the road. Prices have risen by 3% in Q3 2016, equating to an additional £22 on premiums over the last three months alone.

While not as large as the previous quarter’s rise (prices increased by £44 (or 7%) between Q1 and Q2 2016), drivers are still paying £65 more on average for car insurance than at the beginning of the year (Q4 2015 = £672).

Coupled with hikes in insurance premium tax, which is up to 10% from 6% this time last year1, and rising fuel prices2, and it’s likely that many motorists will be feeling the pinch when it comes to the cost of owning and running a car.

Looking at the price index in more depth, it’s clear that some motorists have been hit harder than others. In particular, older drivers continue to bear the brunt of the biggest increases. 66-year-olds, whose average premium stands at £434, have seen the largest yearly rise and can now expect to pay 28% more for cover than 12 months ago. By comparison, the youngest drivers, 17-year-olds, have experienced the smallest year-on-year price increases of any age group at just 9% - their average premium now stands at £2,083.

Despite younger motorists generally experiencing smaller percentage yearly increases, drivers under the age of 25 can all expect to pay more than £1,000 on average for car insurance (25-year-olds pay £1,041 on average, dropping to £981 for those aged 26). Motorists aged 60 and over, by contrast, can typically expect to pay less than £500 (the exception being those aged 68 who pay £507 on average).

18-year-old drivers have the dubious honour of paying the most for car insurance of any age – their average annual premium comes to £2,106. At the opposite end of the scale, 69-year-olds pay the cheapest premiums at £413 on average, £1,693 less than a typical 18-year-old driver.

The one bit of good news for younger motorists, albeit minor, is that 19 and 20-year-old drivers are the only ages to experience quarterly decreases in the average cost of their car insurance, by 0.1% (-£3) and 0.3% (-£5) respectively.

Both male and female drivers have seen their premiums rise substantially over the last 12 months. However, males have seen prices creep up slightly more than their female counterparts, by 19% (+£124 year-on-year) and 15% (+£90 year-on-year) respectively. Meanwhile, the third quarter of 2016 has seen a further jump of 3% for men, and 3% for women. As a result, the average man’s premium now stands at £781, while for women it is £683.

Even though EU rules have banned insurers from taking gender in to account when calculating premiums since December 20123, the gap in price between men and women’s car insurance continues to widen. There is now a difference of £98 between the sexes in Q3 2016. By comparison, this time three years ago (Q3 2013) the gender price divide stood at just £30, with men still paying more on average4.

Looking across the UK, increases in premiums can be felt in most areas, with no region escaping an annual price hike. But it’s motorists in the Borders region of Scotland that have really drawn the short straw. They’ve seen their car insurance premiums increase by 23% year-on-year and 9% quarter-on-quarter – both the highest annual and quarterly increases of any region.

Drivers in this area can take some comfort, however, in the fact their average premium - at £520 - is still the least expensive of any region. This is in stark contrast with drivers in the capital, who typically pay the most for their car insurance. The average premium of a motorist in Inner London, for example, is £1,193 - the highest of any region in the UK. It’s perhaps not surprising then that eight out of 10 of the most expensive postcode areas in the UK all fall within the Greater London area.

Looking across all three demographics (age, gender and region) and it is men aged 17-20 in Inner London that pay the most for their car insurance of all UK drivers. Their average annual premium stands at a hefty £3,126. This is £2,898 more than females aged 66-70 in the Highlands & Islands region of Scotland, who pay the least for their car insurance at £228 on average.

Amanda Stretton, motoring editor at Confused.com says: “With the average comprehensive car insurance premium up a staggering 17% annually, many cash-strapped car owners will no doubt wish they could slam on the brakes on the escalating cost of motoring.

"Drivers are now paying £65 more on average for their car insurance than at the start of 2016, and £109 more than this time last year, bringing the £737 average premium ever closer to the £858 peak we saw in 2011.

"These rising prices make it crucial that drivers seek to reduce the cost of motoring wherever they can. As ever, our advice to all motorists is to shop around using a site such as Confused.com, which can help drivers save on their car insurance; find the best finance deals; and slash running costs with our handy tools, tips and guides."

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Notes to editors:

More than 4 million quotes are used in the construction of each quarter’s insurance price index - this makes it the most comprehensive insurance index in the UK. Unless otherwise stated all prices referred to are for comprehensive cover.

The following web pages will be updated to reflect the new figures and can be linked to:

4. Car insurance for men is on average higher than for women, for example because certain male-dominated occupations have a poorer claims experience, which is reflected in the premium charged. Also, on average, men drive larger and more costly vehicles.

The index is compiled using anonymous data from all enquiries submitted on Confused.com. In line with the draft Office of Fair Trading (OFT) commitments on the use of competitor price data, the prices used for calculating the index are based on an average of the best five quotes received on Confused.com. The OFT closed on the 1st April 2014 and the commitments are now governed by the Competition and Markets Authority (CMA).

About Willis Towers Watson:

Willis Towers Watson (NASDAQ: WLTW ) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

About Confused.com

Launched in 2002, Confused.com was the UK's first price comparison site for car insurance and is one of the UK’s biggest and most popular price comparison services, generating over one million quotes per month. It has expanded its range of comparison products over the last couple of years to include small van insurance, motorcycle insurance, car buying and selling, and car finance, as well as a number of tools designed to save drivers money on motoring.

Confused.com is not a supplier, insurance company or broker. It provides an objective and unbiased comparison service. By using cutting-edge technology, it has developed a series of intelligent web-based solutions that evaluate a number of risk factors to help customers with their decision-making, subsequently finding them great deals on a wide-range of insurance products, financial services, utilities and more. Confused.com’s service is based on the most up-to-date information provided by UK suppliers and industry regulators.

Confused.com is owned by the Admiral Group plc. Admiral listed on the London Stock Exchange in September 2004. Confused.com is regulated by the Financial Conduct Authority.

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